Download this Paper Open PDF in Browser

Premuneration Values and Investments in Matching Markets

39 Pages Posted: 15 Mar 2012  

George J. Mailath

University of Pennsylvania - Department of Economics

Andrew Postlewaite

University of Pennsylvania - Department of Economics

Larry Samuelson

Yale University - Department of Economics; Yale University - Cowles Foundation

Multiple version iconThere are 5 versions of this paper

Date Written: March 12, 2012

Abstract

We examine markets in which agents make investments and then match into pairs, creating surpluses that depend on their investments and that can be split between the matched agents. In general, each of the matched agents would ”own" part of the surplus in the absence of interagent transfers. Most of the work in the large bargaining-and matching literature ignores this initial ownership of the surplus. We show that when investments are not observable to potential partners, initial ownership affects the efficiency of equilibrium investments and affects the agents' payoffs. In particular, it is possible that reallocating initial ownership could increase welfare on both sides of the match.

Keywords: Directed search, matching, premuneration value, prematch investments, search

JEL Classification: C78, D40, D41, D50, D83

Suggested Citation

Mailath, George J. and Postlewaite, Andrew and Samuelson, Larry, Premuneration Values and Investments in Matching Markets (March 12, 2012). PIER Working Paper No. 12-008. Available at SSRN: https://ssrn.com/abstract=2021900 or http://dx.doi.org/10.2139/ssrn.2021900

George J. Mailath (Contact Author)

University of Pennsylvania - Department of Economics ( email )

160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-7749 (Phone)
215-573-2057 (Fax)

HOME PAGE: http://www.ssc.upenn.edu/~gmailath

Andrew Postlewaite

University of Pennsylvania - Department of Economics ( email )

160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-7350 (Phone)
215-573-2057 (Fax)

HOME PAGE: http://www.econ.upenn.edu/~apostlew

Larry Samuelson

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Paper statistics

Downloads
31
Abstract Views
452